A day after Federal Reserve Chair Jerome Powell painted a less-than-rosy picture of the U.S. employment situation, economic data provided some support for that idea.
The Labor Department on Thursday reported 793,000 initial unemployment-benefits claims for the week ended Feb. 6. That was better than the prior week's revised 812,000 filings, but more than the 760,000 expected by economists surveyed by Bloomberg.
Stocks broadly searched for direction for another day, though a couple pockets of the market had a very clear bent. Semiconductor stocks including Nvidia (NVDA, +3.3%) and Intel (INTC, +3.1%) shot higher on increasingly higher chip demand. Marijuana stocks, which had recently sprinted to downright giddy valuations, lost quite a bit of froth – Tilray (TLRY, -49.7%) and merger partner Aphria (APHA, -35.8%) were among the biggest decliners.
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All of the major indices were in the red at some point Thursday, though several managed to reclaim positive territory. The Dow Jones Industrial Average declined marginally to 31,430, but the S&P 500 (+0.2% to 3,916) and Nasdaq Composite (+0.4% to 14,025) recovered and climbed just enough to set new all-time highs.
Other action in the stock market today:
- The small-cap Russell 2000 gained 0.1% to 2,285.
- U.S. crude oil futures finally ran out of gas, declining 0.8% to $58.24 per barrel, ending its win streak at eight consecutive sessions.
- Gold futures settled 0.9% lower to $1,826.80 per ounce.
- Bitcoin prices, at $44,775 on Wednesday, rebounded 8.0% to $48,379 on Thursday. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
It's Not Too Late for Economic Recovery Plays
For the past few months, you've heard about several "reflation trade" sectors (think bank stocks or oil plays) expected to bounce back as the economy does. While share prices in these sectors have been rising, as has the overall market, they still have ample fuel in the tank.
So says Canaccord Genuity equity strategist Tony Dwyer, who adds that we've seen similar market action before.
"We adopted the economic recovery theme last summer and suggested it was likely to be a multi-year thesis," he says. "There has been nothing to alter our view despite the lackluster relative performance since last November. … The macro backdrop and market action coming off the March 2020 low continues to track the gains coming out of the Great Financial Crisis, which means corrections may be coming followed by even more gains."
Those considering trying to make the most of this multiyear thesis can certainly do so via sector funds. However, those looking to generate a bit more alpha with more focused picks, should take note of who the pros like across (at a minimum) the rest of 2021. That includes financials and energy, as well as two areas that have some more catching up to do: materials and industrials.
Kyle Woodley was long NVDA and Bitcoin as of this writing.
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